Chris J. van Staden

The Effect of Board Characteristics on Firm Environmental Performance

This study investigates the relationship between strong firm environmental performance and board characteristics that capture boards’ monitoring and resource provision abilities during an era when the natural environment and the related strategic opportunities have increased in importance. The authors relate the proxy for strong environmental performance to board characteristics that represent boards’ monitoring role (i.e., independence, CEO-chair duality, concentration of directors appointed after the CEO, and director shareholding) and resource provision role (i.e., board size, directors on multiple boards, CEOs of other firms on the board, lawyers on the board, and director tenure). The authors provide evidence consistent with both theories of board roles. Specifically, consistent with their agency theory–driven predictions, the authors find evidence of higher environmental performance in firms with higher board independence and lower concentration of directors appointed after the CEO on the board of directors. Consistent with resource dependence theory, they show that environmental performance is higher in firms that have larger boards, larger representation of active CEOs on the board, and more legal experts on the board. Their findings are generally robust to a number of sensitivity analyses. These findings have implications for managers, firms, shareholders, and regulators who act on behalf of shareholders, if they are interested in influencing environmental performance.

Are CSR Disclosures Value Relevant? Cross-Country Evidence

Abstract Using proprietary data that rate corporate social responsibility (CSR) disclosures of firms in 21 countries, this study examines how the strength of nation-level institutions affects the extent of CSR disclosures. We then examine the valuation implications of CSR disclosures and consider how the relation between CSR disclosures and firm value varies across countries. In contrast to prior studies, we separate CSR disclosures into an expected and unexpected portion where the unexpected portion is a proxy for the incremental information contained in CSR disclosures. We observe a positive relation between unexpected CSR disclosure and firm value measured by Tobins Q. We also find that, while countries with strong nation-level institutions promote more CSR disclosures, the valuation of a unit increase in unexpected CSR disclosures is higher when nation-level institutions are weak.

The value added statement – an appropriate instrument for Integrated Reporting

Purpose - – The purpose of this paper is to contribute to the current discussions about the concept of Integrated Reporting (IR) and provides a practical and useful proposal of an instrument that could help to apply the IR concept in corporate practice. Design/methodology/approach - – The study uses a deductive normative research approach. Findings - – Based on a comprehensive review of international literature and research, the paper argues that a structured presentation of the traditional measure of “value added” in a so-called “value added statement” (VAS) has the potential to serve as a practical and effective reporting instrument for IR. The proposed VAS not only meets the guiding principles of IR but also reports on the monetary effects of different types of capital included in IR and in this way complements and represents the concept of IR very well. Research limitations/implications - – The authors intend to stimulate the academic as well as institutional discussion on how to apply the concept of IR at the corporate level. As the characteristics of the proposed VAS comply well with the guiding principles and concepts developed in the Integrated Reporting Framework project of the International Integrated Reporting Council (IIRC) and with the ultimate objective of integrated thinking, the study can inform the current considerations within and outside of the IIRC. Originality/value - – The future of IR and the probability of its world-wide application in practice will depend on the development of appropriate reporting tools that incorporate the central ideas of IR, currently no such reporting tools exist. In this paper the authors make an argument for a VAS as a complementing, useful and therefore appropriate reporting tool for IR.

Disclosure Responses to Mining Accidents: South African Evidence

Abstract Mining activities generate significant social concerns in terms of employee safety and stakeholder scrutiny has increased considerably in recent years. Social and environmental accounting research is largely dedicated to environmental issues and the study of other components of social accounting is limited. This study examines safety disclosures in the annual reports, sustainability reports, and reactive corporate press releases of South African mining organisations following two major mining accidents occurring at Harmony Gold and Gold Fields’ mines. Results show that organisations react to perceived legitimacy threats through increased safety disclosures. The entire mining industry evidences an increase in disclosure levels after the incidents, suggesting that organisations do respond to increased stakeholder scrutiny threatening their legitimacy. Furthermore, our results provide evidence of an association between safety disclosure levels and firm size, social performance, risk, and number of fatalities, while the media attention devoted to mining accidents appears to be unrelated to safety disclosure levels. It is possible that stakeholder pressure, which motivates corporate social disclosures according to legitimacy and stakeholder theories, consists of various factors, which combined form the motivation to report. Media attention, therefore, cannot be considered in isolation as a driver of disclosure. Rather, a combination of variables such as size, social responsibility performance, number of fatalities, risk, and media attention could serve as a proxy for social pressure.

The influence of corporate social responsibility disclosure on share prices Evidence from the United Kingdom

Purpose – The purpose of this paper is to examine the association between share prices and the level of corporate social responsibility (CSR) disclosure of large UK companies, using CSR data from an independent firm and a time period and setting (the UK) that coincides with increased legislation and increased public awareness of corporate social and environmental issues. Against a background of increased interest by investors in CSR disclosure, prior mixed results on the association between CSR disclosure and share prices suggest the need for further research that overcome some of the identified limitations of the extant literature. Design/methodology/approach – A modified Ohlson (1995) model is used to examine the relationship between CSR disclosure and share prices among the 100 largest UK companies. Three different measures of CSR disclosure are used to ensure robustness of results. Findings – The paper finds that higher levels of CSR disclosure are associated with higher share prices. Furthermore, the...

The Relevance of Theories of Political Economy to the Understanding of Financial Reporting in South Africa: The Case of Value Added Statements

In South Africa there has been a sustained increase in the level of publication of the value added statement since the mid 1980s. Currently nearly 50% of all companies listed on the Johannesburg Stock Exchange publish a value added statement as part of their annual financial statements and a much higher proportion of the top 100 companies in the industrial sector publish the statement. The aim of this research is to contribute towards an understanding of the motivation for the sustained high level of publication of the value added statement, which is confined to South Africa at present. The findings indicate that legitimacy theory and the political economy of accounting theory provide the best explanation for the continued publication of the statement in South Africa. Evidence was also found that supports the use of the value added statement for legitimising current action and behaviour rather than reporting objectively on social issues. This paper extends the literature on legitimacy theory to a social disclosure, the publication of the value added statement. It also contributes to the literature by showing that legitimising behaviour is also observed when a major political change brings uncertainty as to societys expectations of the economic system and the role of private enterprise.

Black economic empowerment, legitimacy and the value added statement: evidence from post-apartheid South Africa

We examine why companies in South Africa voluntarily provide a value added statement (VAS). The VAS can be used by management to communicate with employees and thereby establish a record of legitimacy. Since we want to establish if the VAS is used to establish symbolic or substantive legitimacy, we examine whether production of a VAS is associated with actual performance in labour-related areas. To measure labour-related performance, we use an independent Black Economic Empowerment (BEE) rating. We find that BEE performance is significantly and positively related to the voluntary publication of a VAS. Our results suggest that BEE performance and disclosure of a VAS are two elements of a strategy used by South African companies to establish their substantive legitimacy with labour. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.

Motivations for corporate social and environmental reporting: New Zealand evidence

Purpose This paper aims to investigate corporate motivations for voluntarily reporting social and environmental information in New Zealand. The approach used in this study also gives the opportunity to gain insights into the internal systems and views of companies and allows the authors to make better judgements of the intentions of companies in undertaking corporate social responsibility (CSR) reporting. Design/methodology/approach A survey is used and then extended to match corporate survey responses with content analysis results of actual company reporting. The results of the survey and the content analysis are examined both individually and collectively to gather more context for corporate motivations. Findings The authors find that community concerns and shareholder rights were the most important factors that influenced the companies’ decision to report. The driving force for a sustainability agenda within these companies is usually a member of senior management. The authors also find that reporting frameworks and highly formalised internal systems were not frequently used, external assurance of CSR reporting was lacking and there were low levels of stakeholder engagement. A commitment to reporting comprehensive CSR disclosures and accepting responsibility towards a range of stakeholders were, therefore, not in evidence. Research limitations/implications For researchers, the value is in further revising analysis techniques and expanding existing research methods used in this area. The study brings together important CSR topics from across the literature, including reporting levels and characteristics, internal CSR systems, CSR assurance and stakeholder engagement, to investigate the motivation for CSR reporting. Practical implications The results suggest that New Zealand companies are not currently fully committed to social and environmental reporting and that CSR reporting is most likely used to create the impression of being concerned about sustainability to increase legitimacy with stakeholders and society. The results highlight the importance of having formalised systems to ensure that disclosures are accurate and comprehensive. Originality/value The results contribute to the literature by providing a current view of the motivations for reporting companies to report or not report. The approach used gives the opportunity to gain insights into the internal systems and views of companies and allows the authors to make better judgements of the intentions of companies in undertaking CSR reporting.

The environmental disclosures of the electricity generation industry: a global perspective

The electricity generation industry has been under close regulatory and public scrutiny for decades for the significant impacts its activities have on the environment. The industry is responsible for a large proportion of greenhouse gas (GHG) emissions, which has intensified public and regulatory scrutiny of late. Therefore, electricity generation firms face immense pressure to show environmental responsibility. Firms respond with environmental disclosures in their annual reports, in stand-alone-reports, and on websites. In this study, we use comprehensive disclosure indices to measure the quality (or comprehensiveness) of the CO2 emissions related disclosure and the overall environmental disclosure of 205 electricity generation firms in 35 countries. We find that firms in countries with a high commitment towards the environment and a carbon emissions trading scheme (measures of social concern for environmental protection and emissions), are likely to disclose more comprehensive environmental information. In addition, we find that firm size, age of the assets, listing status, and media exposure influence disclosure. Environmental performance, measured by CO2 emissions, is not significantly related to environmental disclosure among our sample firms. The theoretical implication of these findings is that social beliefs (that are different in different countries) prompt a legitimating disclosure response from firms that is not significantly affected by their performance against that social belief.

The readability impact of international financial reporting standards

Purpose – This paper aims to compare the readability of narrative annual report disclosure pre- and post-International Financial Reporting Standards (IFRS) adoption using a computational linguistics programme to determine if annual report disclosures have become more difficult or easier to read following the adoption of IFRS. Design/methodology/approach – This paper empirically measures narrative annual report disclosure readability pre- and post-IFRS adoption using a computational linguistics programme. In this analysis, the authors control for variables that have been identified as relevant to the understanding of financial disclosures, such as size, business volatility, financial leverage and industry. Findings – Significant relationships have been identified between IFRS adoption and reduced readability indicators using readability formulas, and also using other factors such as increased length of annual report disclosures and increased use of tables. Findings suggest that the adoption of IFRS has add...